Backfire: Carly Fiorina's High-stakes Battle for the Soul of Hewlett-Packard [Hardcover]

Peter Burrows offers insights into high level business, where personality matters more than economics, as he explores the mammoth HP-Compaq merger. Most mergers fail to make money or to produce the promised “synergies” so, he asks, why — other than ego — do CEOs pursue them? Though stylistically somewhat trite, this book successfully explores the HP Board’s decision to approve the merger, with Walter B. Hewlett’s vote in favor, and his subsequent lonely, ultimately quixotic battle against it. The most contentious issues in contemporary business are all here: shareholder rights and value vs. CEO power; employee-oriented cultures vs. “re-engineering;” corporate integrity vs. sharp practice; and the interesting spectacle of a ruthless, hard-headed female CEO pitted against a sensitive, cello-playing man. The author says Hewlett-Packard executives were told not to speak with him after he quoted merger critics in Business Week, so there is an inevitable Walter Hewlett bias. We found this to be a very good read, even a must read, for corporate warriors.

Peter Burrows offers insights into high level business, where personality matters more than economics, as he explores the mammoth HP-Compaq merger. Most mergers fail to make money or to produce the promised "synergies" so, he asks, why - other than ego - do CEOs pursue them? Though stylistically somewhat trite, this book successfully explores the HP Board's decision to approve the merger, with Walter B. Hewlett's vote in favor, and his subsequent lonely, ultimately quixotic battle against it. The most contentious issues in contemporary business are all here: shareholder rights and value vs. CEO power; employee-oriented cultures vs. "re-engineering;" corporate integrity vs. sharp practice; and the interesting spectacle of a ruthless, hard-headed female CEO pitted against a sensitive, cello-playing man. The author says Hewlett-Packard executives were told not to speak with him after he quoted merger critics in Business Week, so there is an inevitable Walter Hewlett bias. We found this to be a very good read, even a must read, for corporate warriors.

HP is a company in transition. For decades one of the fastest growing companies in history, it is now seen as a beleaguered giant, risk averse and unable to transform itself.

This book situates the company's crisis in the context of the ascension of Carly Fiorina to the position of CEO and her brutal fight to acquire Compaq while changing the company.

The origins of Hewlett-Packard have become the stuff of legend. During an electrical engineering class at Stanford in 1934, Bill Hewlett and David Packard began to formulate a vision for a company; their professor, Fred Terman, immediately recognized their talent and set about to mentor them. Four years later, in a rented garage with just $538, Hewlett and Packard, flipping a coin to decide whose name would come first, founded Hewlett-Packard. From the start, HP strove to create innovative technology products, predominantly in the instrumentation and measurement field. Their first big break came with the Disney company's purchase of an audio oscillator, which it used to fine tune the sound track for the experimental music film Fantasia. As the company grew, the founders articulated a series of objectives ("the HP Way"), which included the necessity to make a profit with a focus on innovation in the electronics field, but also an egalitarian culture that emphasized employee profit-sharing, career opportunities, and a contribution to the community.

According to many employees, the HP Way helped to create an exceptional work environment, in which individual opinions mattered and strong personal relationships of trust grew along with professional engagement. Many HP employees spent their entire careers at the company. According to David Packard, HP sought to balance entrepreneurship against insubordination: if an employee chose to continue to develop a product on his own after it was officially terminated, he often would be allowed to do so within limits. Time and again, Packard found, such entrepreneurship resulted in breakthrough instruments, such as oscillator viewer screens, that generated millions of dollars in revenues. To maintain this entrepreneurial spirit, as profitable groups grew within HP they were allowed to function as near-autonomous divisions. This was particularly well suited to the booming electronic instrument business: with a few hundred thousand dollars, a small group could develop a product for a unique area of need and then sell it on their own. For decades, this structure worked. From 1958 to 1998, the company grew an average of 20.2 percent per year, a record that no other company has surpassed.

As Burrows relates, during the late 1960s, HP began to develop computers and related product lines and technologies. This represented a major departure for the company, away from its core business of electronic instrumentation. While the move opened huge new areas of potential profit - from printers and personal computers to pocket calculators and specialized semiconductor processors - it vastly increased the complexity of the company. Not only did R&D often require millions of dollars over decades to develop competitive product lines, but by the end of the 1990s there were over 80 quasi-independent businesses under the HP umbrella; often operating in separate geographical regions, each of these groups had its own sales force, its own engineers and designers, and its own software developers. By 1997, when HP began to miss its financial targets for the first time, many in the company began to fear that it was losing its way, that its structure had become wasteful, unwieldy, and worst of all, risk averse. Furthermore, after having invested so heavily in computers, HP executives recognized that the industry was becoming increasingly commoditized. In the opinion of industry observers, the moment had arrived to shake up the company.

After a few attempts to transform the company from within, the HP board chose Carly Fiorina as the new CEO in 1999, an acknowledged high tech "rock star" who recently had headed sales at Lucent, the communications hardware giant that had spun off from the AT&T breakup. From the start, she was a controversial presence in the company. For example, her specialty was marketing, which automatically branded her as an outsider in an engineering company. Moreover, as a media darling, the personal publicity she attracted made many longtime HP executives uncomfortable. However, others argued that she was bringing a fresh perspective on where the company should go, that she could gain an overview that few insiders had and would formulate a new strategic direction. In particular, Fiorina argued that with the unmatched breadth of its product lines, HP might somehow combine them into a more coherent whole, perhaps by focusing on the internet. Nonetheless, this vision of strategic synthesis remained to be defined in detail.

So far so good. This background was extremely useful for me and covers to about 2004. But from this point, Burrows goes into excruciating detail about Fiorina's personality and style as well as adds several chapters on the civil war within the company that the acquisition of Compaq sparked. None of that interested me much, though this is the "intrigue" that many readers found most interesting. Then, the book ends as she obtains the acquisition, well short of the aftermath in which she was fired. So in addition to being too gossipy for me, it is already outdated.

Burrows is a good journalist and covers a lot here in a better way than I have found elsewhere, but it is not very deep and glosses over many of the others issues that Fiorina was concerned about, such as the creation of synergies between the 83 largely independent businesses that make up the company.

Recommended tepidly.
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